Ryutaro Hashimoto is Japan's Minister of International Trade and Industry.
Though written before the US and Japan came to a last-minute agreement on
June 28, this article reflects just how far the Japanese government caved
into American pressure, pledging to press Japan's auto manufacturers to
open up dealerships to foreigners and voluntarily purchase more American
auto parts.

TOKYO - Unfortunately, Japan and the United States
have not yet been able to reach agreement in their automobile and auto
parts talks, despite intensive negotiations held in Canada in early May.

In those discussions, we considered dealership and aftermarket
deregulation to be the important issues, while the US regarded the renewal
and expansion of the "voluntary plans" of parts purchases-which
are virtually purchasing quotas-as essential for agreement. The US had
once agreed that "voluntary plans" were outside the scope of
the Framework Talks because they are issues outside the scope of government
responsibility.

However, since the US is now insisting on "voluntary
plans," against our objections, we could not reach agreement. If
the US had not so insisted we could have reached agreement without difficulties.
Another US request for a target on the number of dealerships offering
foreign brands made resolution all the more difficult.

We truly believe we have affirmatively responded to A
the US requests on dealership and aftermarket deregulation - the major
issues properly within the government's responsibility - within the international
rules and auto safety considerations in Japan.

We are confident that the package we proposed this time
will be a great help to foreign firms in entering the Japanese market.
We also believe that the aftermarket deregulation proposal, such as reduction
of the number of critical parts and deregulation of modification inspection
requirements, Will sufficiently please not only foreign firms, but also
users in Japan.

The experience of European manufacturers shows that when
appropriate efforts to match the features of the Japanese market are made-including
the necessity for right-hand-drive automobiles -foreign manufacturers
can succeed in the Japanese market. The share of automobiles in Japan
from the European Union is 4.86 percent, whereas the US share is 3.16
percent.

It is important in this context that world opinion understand
that the Japan- US Framework Talks do not guarantee sales and purchasing
outcomes, but contribute to creating sales and purchasing opportunities.

The US side's insistence on "voluntary plans"
outside the scope of government's responsibility remains an insurmountable
stumbling block to a negotiated agreement. The US request amounts to numerical
targets and could lead to managed trade. A government cannot intervene
in and distort private firms' business strategies.

In addition, Japanese auto companies have explicitly
refused to renew their existing "voluntary plans." The Americans
know that such a request amounts to nothing less than forcing Japanese
companies to favor and buy US parts. That is clearly inconsistent with
the World Trade Organization (WTO) agreement and a violation of the most-favored-nation
principle in trade.

Sir Leon Britain of the European Union and Minister Roy
MacLaren of Canada, as well as officials from Asian countries, also express
great concerns about this particular US request.

Japan has no intention of ignoring the WTO agreement
and adopting or encouraging such gray measures. Regrettably, on May 16,
the US announced a list of proposed unilateral measures, clearly inconsistent
with WTO rules, that would subject certain Japanese luxury cars to duties
of 100 percent in response to the impasse in our talks. Because this action
would significantly damage Japanese industry and trade, we decided to
request that the US enter into consultation under the globally accepted
trade rules and begin the procedure of the WTO dispute settlement.

The pursuit of unilateral action by the US will be a
critical challenge to the newly established WTO trade system. Countries
all over the world concur with our position on this matter.

At the same time as our request was filed with the WTO,
the US also announced its request for a consultation in the WTO on the
Japanese auto and auto parts markets. This shows the inconsistency of
the US argument: neglecting the WTO on one hand, while requesting a WTO
consultation on the other. Nevertheless, we are ready to take this opportunity
to show that our automobile and auto parts markets are open and fair.

Lastly, I want to stress that those who would suffer
heavily from such US action include not only Japanese auto manufacturers,
but also consumers and workers in the United States. If the US unilateral
measures are implemented, there will be a severely adverse impact on more
than 60,000 Americans who work for Japanese auto-related companies, and
about 10 percent of US auto parts exports to Japan worth nearly $250 million
will come to a halt.

Japan is confident in its position and trusts that the
WTO will serve as a neutral judge to resolve the matter fairly.